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Proprietorship Firm Registration
A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by one person. Sole proprietorship's are one of the most common forms of business in India, used by most micro and small businesses operating in the unorganized sectors. Proprietorships are very easy to start and have very minimal regulatory compliance requirement for started and operating. However, after the startup phase, proprietorship's do not offer the promoter a host of benefits such as limited liability proprietorship, corporate status, separate legal entity, independent existence, transferability, perpetual existence - which are desirable features for any business. Therefore, proprietorship registration is suited only for unorganized, small businesses that will remain small and/or have a limited period of existence. .

There is no mechanism provided by the Government of India for the registration of a Proprietorship. Therefore, the existence of a proprietorship must be established through tax registrations and other business registrations that a business is required to have as per the rules and regulations. For instance, VAT or Service Tax or GST Registration can be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship. Thus, all the registrations for a proprietorship would be in the name of the Proprietor, making the Proprietor personally liable for all the liabilities of the Proprietorship..

As a sole proprietor, main objective of the firm is opening a current bank account on the name of business. so basically most of the banks ask for any legal certification where your legal business name with proprietorship status has been mentioned. so there are lot of the valid certifications work's in case of sole proprietorship firm. So here we divided all the certification in mainly 2 categories as per the RBI Compliance to open a current bank account.

Updated info on 20th June 2017 as per the GST Impact on the Proprietorship Firms.

For convenience of the readers we can divide all valid license certificates in the 2 Categories

A) Basic Local or Central Government or other body license
B) Tax Registration in India ( GST Registration )


a) Basic Local or Central Government or other Body License -
These type license are issued by the central government or state government or any other body on the name of sole proprietorship Firm. Most of the banks required anyone minimum 2 Valid Certification out of 4 in this category which are following -.

• Chartered Accountant Certificate - ICAI (The Institute of Chartered Accountant of India) is a body which is incorporated by the government of India for the chartered accountants. so all the practicing members only of ICAI (i.e is CA) can verify the documents and information of the sole proprietor & issued a CA Certification to open a current bank account on propreitor name.

• MSME Registration Certificate -MSME (Micro small and medium enterprise) is a government body which is incorporated for formation of rules & regulations for small business in India so they can issued a registration certificate on the name of proprietorship firm.

• Shop Act License - Every state or regional city or area have a municipal party to control on the local business which is incorporated by the respective state government. so they can issued also a shop act license on the physical shop name as proprietorship firm status.

• Income Tax Return (Business ITR) - Every person which are living and earn in India, they have to pay the income tax yearly basis. so if you are earning from your business as freelancer then you can file your ITR on business name as proprietorship firm status.
As the NGO organizations are operating as a legal entity, Indian government encourages such nonprofit organization to make them eligible with specific certifications, tax exemptions, additional power of importing funds through special permission from Indian Government and special project implementations through Social welfare ministry of India.

So all the proprietorship firm owner's which is just starting the new business, they can go with the anyone above 2 legal valid certification. we highly recommend to you go with the CA Certification and MSME Registration Certificate or CA+ Income Tax Return which is issued by the central government & you can run your business anywhere in India.

Reasons to Register a Proprietorship Firm

Easy to Start

Proprietorship needs minimal registration. Therefore, it is one of the easiest form of business entity to start with minimal formalities. However, after starting up a Proprietorship, it is relatively harder to open a bank account or obtain a payment gateway in the name of the business - since more registrations like VAT or Service Tax or GST Registration may be required.

Business Name

Since the name of a proprietorship is not registered, a proprietorship can choose to have any name - as long as it does not infringe on a registered trademark. However, since the name is not registered, any other person can also use the same business name unless trademark registration is obtained.

Lower Taxes

Proprietorship with less than Rs. 3 lakhs of income is not required to pay any income tax, as proprietorship's are taxed as the individual owing the business. However, unlike a company or LLP, a proprietorship cannot enjoy some of the tax deductions, which could potentially increase the tax liability.

Single Promoter

Proprietorship is the only type of business entity that can be registered and operated by one person. To register a one person company, a nominee Director is required and for all other types of entities like company or LLP or partnership firm, two or more promoters are required.

Easy to Close

The Proprietor and the proprietorship are one and the same for all legal purposes. Hence, there is no formality for winding up or closing a proprietorship. In most cases, to close a proprietorship, only the tax registrations obtained in the name of the proprietor must be cancelled.

• A sole Proprietorship is cheaper as compared to OPC.
• A proprietorship with income of less than Rs. 2 Lakhs per annum is not required to pay income tax.
• Easy to establish with less formalities


b) Tax Registration (GST Registration ) -

So From 1st July 2017 the government of India imposed the GST on all the business. GST is basically a uniform tax which is replace the various taxes like Service Tax | VAT/CST Registration or TIN Number etc.

Situation before the GST Registration for the sole proprietorship firms -

1. Service Tax Registration -

In India all the service providers business which have more than 9 lakh rupees turnover or sales in a year, they have to register under the service tax and charge the 15% from the customer extra & pay to the government but now its has been converted into the GST Registration.

2. VAT/CST or TIN Number - In india all the product based business or manufactures which have more than 5 lakh rupees turnover or sales or dealing as trading or want to sell on flipkart or amazon or snapdeal or paytm etc. they have to register the VAT/CST or TIN Number in respective state but now its has been converted into the GST Registration.

So Ultimately Now whether you are doing service based business or product based business, you have to required only the GST ( Good and Service Tax) when turnover or sales cross more than 20 lakh rupees in a year or in the north east state 10 lakh rupees in a year. but in some following cases you have to required the GST Registration as sole proprietorship firm in the starting :-

• When you want to sell the products on ECommerce platforms.
• When you are doing trading or retail and your other suppliers are registered under the GST.
• When your customers are asking for the GST Bills to avail the credit.

Conclusion about to Register a Sole Proprietorship Firm in India :-

a) Option 1 as CA Certification + MSME or CA Certification + ITR or CA Certification + Shop act license - Go with this option when you just starting your very small business and not required the GST Registration in any condition till the 20 lakh rupees turnover.

b) Option 2 as GST Registration - Go with this option when you starting a business and required the GST Registration as mandatory or voluntary registration due to business nature legal conditions.

Process of Registration

Step 1 - Prepare CA Certificate
It will take 1 working day in preparing CA Certificate.
Step 2 - Apply for PAN/TAN
On the basis of apply PAN/TAN with NSDL facilatation centre.
Step 3 - Genrate Shop & Establishment Certificate
On the wesite of MCD genrate a shop & establishment certificate in the name of your firm

FAQ

What is Proprietorship Business?

Proprietorship or sole proprietorship which is also known as sole trader is a type of business entity owned and operated by one person. It is also like a individual giving business name for himself to perform business activities professionally.

What is Proprietorship Register.com?

PROPRIETORSHIP REGISTER is a Private company primarily doing consultancy and professional services for proprietor business owners in India to get different types of proprietorship certificate based on their business by procuring certain consultation fees from the customer.

Who can be a Proprietor?

The Proprietor must be an Indian citizen and a Resident of India.

Will Proprietorship Firm have Certificate of Incorporation?

Proprietorship firms do not have a Certificate of Incorporation.

How much money do I need to invest upfront in starting the business?

There is no limit on the minimum capital for starting a Proprietorship. Therefore, a Proprietorship can be started with any amount of minimum capital.

How to open a Bank account for a Proprietorship firm?

To open a bank account for a Proprietorship, Reserve Bank of India mandates that the proprietor must provide two forms of registration for the Proprietorship firm along with the PAN Card, identity proof and address proof of the Proprietor. The two forms of registration can be any two of the following: service tax registration, MSME registration, VAT/TIN/CST registration, Shop & Establishment Act registration, Professional license, Chartered Accountant certificate or others as provided in the RBI Know Your Customer norms.

What capital is required to start a Proprietorship?

A proprietorship can be started with any amount of minimum capital.

Do I need one person to start a Proprietorship?

Yes, only one person is required to start a Proprietorship and a Proprietorship can have only one promoter.

Does the proprietor have to be an Indian to start a Proprietorship firm?

The Proprietor must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.

What documents are required to start a Proprietorship?

Address proof or Aadhar Card and a PAN card are sufficient for a person to start a proprietorship.

How to open a bank account for a Proprietorship?

To open a bank account for a Proprietorship, Reserve Bank of India mandates that the proprietor provide two forms of registration for the Proprietorship along with the PAN Card, identity proof and address proof of the Proprietor. The two forms of registration can be any two of the following: service tax registration, MSME registration, VAT/TIN/CST registration, shop & establishment Act registration, Professional license, Chartered Accountant certificate or others as provided in the RBI Know Your Customer norms.

Will my Proprietorship firm have a Certificate of Incorporation or Registration?

Proprietorship firms do not have a Certificate of Incorporation or Certificate of Registration. The identity and legitimacy of a Proprietorship firm is established by registering with the relevant or applicable Government authorities.

How to register the name of a Proprietorship?

There is no registry or regulation for the registering the name of a Proprietorship. Therefore, proprietorship firms can adopt any name that do not infringe on registered trademarks. Since there is no registry or regulation for registering the name of a Proprietorship, the only way to ensure exclusive use of the business name is to obtain a trademark registration of the business name.

Will my Proprietorship firm have a separate legal identity?

The PAN card of the Proprietorship as well as the Proprietor is the same. Hence, the firm will not have a separate legal identity. The assets and liabilities for the proprietor and the proprietorship is the same

How can I transfer my Proprietorship?

A business operated by proprietorship firm cannot be transferred to another person, unlike a Limited Liability Proprietorship or a Private Limited Company. Only the assets in the Proprietorship can be transferred to another person through sale. Intangible assets like Government approvals, registrations, etc. cannot be transferred to another person.

Can I have partners in a Proprietorship?

Proprietorship firms are business entity that are owned, managed and controlled by one person only.

Can other people invest in a Proprietorship?

Proprietorship firms are business entity that are owned, managed and controlled by one person. So Proprietorship firms cannot issue shares or have investors.

What are the annual compliance requirements for a Proprietorship?

Proprietorship will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filing may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Proprietorships and Companies.

Can I later convert my Proprietorship into a Company or LLP?

A proprietorship can be converted into a company or LLP. However, the procedures to convert a proprietorship business into a Company or LLP are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider and start a LLP or Company instead of a Proprietorship.

Comparison among Proprietorship, Partnership,LLP and Private limited

Particulars Proprietorship Partnership Limited liability partnership Private limited One person company
Registration No Formal Registration Optional Registration,Register under Partnership act 1932 Registration With ROC under LLP Act 2008 Registration With ROC under companies Act 2013 Registration With ROC under Companies Act 2013
Name Approval No Name Approval required No Name Approval Required. Need to be approved by MCA (shall with “LLP”) Need to be approval by MCA (shall with ‘’Private Limited) Need to be approved by MCA (shall end with “ POC private Limited)
Legal Status No separate legal entity from owner No separate legal entity From owners Separate legal entity from owners, personal liability limited to capital Separate legal entity from owners personal liability limited to capital Separate legal entity from owner, personal liability limited to capital
Borrowing Personal Sources & Banks Personal Sources & Banks Personal Sources & Banks Angel Investors, Project Financing, Private debentures, Loans from directors and members (subject to restrictions), banks Personal sources & Banks
Owners Remuneration Owner salary not allowed Partners remuneration Allowed, subject to certain restrictions . Partners remuneration allowed subject to certain restrictions Directors’ Remuneration Allowed as Per Board /member’s agreement Directors’ remuneration allowed as per board/member’s’ agreement
Minimum Vs. Maximum Numbers of Members/Shareholders 1 : 1 2 : 20 2 : Unlimited 2 : 200 1:1
Minimum Vs. Maximum Number of directors N.A N.A N.A 2:15 (can be increased further by resolution 1:15 (can be increased further by resolution
Foreign Member Not Allowed Not Allowed Allowed With Govt. Approval Govt. Approval is required in some sectors Not allowed
Transferability Not Transferable Not Transferable Transferable Easily transferable Transferable
Income Tax Slab Rate (0-10-20-30%) Flat Rate @ 30% Flat Rate @ 30% Flat rate Flat rate @30%
Board Meeting Not Required Not Required Not Required Required periodically Not allowed
Registration Cost X 1.5X 2X 3X 2.5X
Annual Compliances Cost X 2X 3X 3X 3X

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Proprietorship-Firm Registration in India
Proprietorship Firm Registration in Andaman and Nicobar Islands Proprietorship Firm Registration in Andhra Pradesh Proprietorship Firm Registration in Arunachal Pradesh Proprietorship Firm Registration in Assam
Proprietorship Firm Registration in Bihar Proprietorship Firm Registration in Chandigarh Proprietorship Firm Registration in Chhattisgarh Proprietorship Firm Registration in Dadra and Nagar Haveli
Proprietorship Firm Registration in Daman and Diu Proprietorship Firm Registration in Delhi Proprietorship Firm Registration in Goa Proprietorship Firm Registration in Gujarat
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Proprietorship Firm Registration in Karnataka Proprietorship Firm Registration in Kerala Proprietorship Firm Registration in Lakshadweep Proprietorship Firm Registration in Madhya Pradesh
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